Dairy processor Muller is holding its farmgate milk price for November, but warned it is feeling the bite from weak demand for cream and butter.
“Maintaining an unchanged Müller Direct milk price at this point is helping to protect dairy farmer suppliers from the full impact of a challenging market,” said a company spokesman.
“Despite forecasts, we are seeing strong levels of milk production from dairy farmers.
“This, coupled with weak demand for dairy commodities like cream and butter, is significantly impacting returns.”
The announcement means the liquid standard litre price for milk with a constituent content of 4% butterfat and 3.3% protein will stay at 29.5p/litre for the third month in a row.
Cheesemakers Barber’s has also announced a price freeze for November, keeping its manufacturing litre price at 30.68p/litre.
It too points to the fact that dairy markets have cooled “considerably” over the past month.
The two key factors influencing this were higher-than-expected milk production at both the UK and EU level, and a fall in EU butter prices as a result of discounted butter from the southern hemisphere entering the market, it said.
“These factors have unsettled overall dairy market sentiment.”
Tesco on up
However, Tesco’s Sustainable Dairy Group (TSDG) farmers are set to see prices rise from 30.17p/litre to 31.24p/litre from 1 November.
The new price follows a cost tracker review by independent consultant Promar.
Tesco pays the 700 group members a price for milk that reflects the cost of production, calculated from the latest feed, fuel and fertiliser costs submitted to Promar.
Co-operative Arla also announced last week that it was raising the price for October milk.
A standard liquid litre will be worth 31.21p/litre, while a manufacturing litre will attract 32.47p/litre.
Expert market analysis from Peter Meehan, INTL FCStone
Global dairy markets remained under pressure over the past week (ending 30 September) with European dairy spot quotations and futures markets also showing further weakness.
European spot butter saw its fourth consecutive week of declines, down £143/t (-2.9%) to £4,726/t, dropping 7.2% over the past four weeks. Spot skim milk powder (SMP) also dipped lower this week, down £9/t (-1%) to £1,436/t. Futures markets followed spot lower, with EEX butter futures’ October 2018 to May 2019 contracts down 1.7% on average this week, while SMP futures’ October 2018 to May 2019 contracts fell 1.9% over the week.
UK milk production saw its first decline since April, with August collections down 0.7% on last year. However, increased milk constituent levels put milk solid collections on a par with August 2017. Irish collections in August bounced back ahead of last year, up 3.6% on 2017 after July’s sharp decline.
The EU Commission sold just short of 9,000t of intervention SMP in its latest tender, which should help ease the effect that the overhang of intervention stocks is having on the market. Further afield, New Zealand fat exports were relatively strong in August, up 55%, albeit off a low base compared with last year. Milk powder exports were a little more mixed.
Milk market prospects
AHDB Dairy says market signals point to downward pressure on farmgate prices later in the year.
In a milk price movement update on 28 September, it said with milk production showing little or no immediate impact from the hot, dry summer, few concerns remain over a lack of milk supplies.
“This has shifted market sentiment, and put buyers in a stronger position to negotiate lower prices.”
The impact has already been seen on wholesale markets, with prices falling for butter and cream, but mild cheddar prices have held firm for most of the month, it added.